MSC Industrial Direct (MSM) 29 Jun 232023 Q3 Earnings call transcript

Good morning and welcome to the MSC Industrial Supply Fiscal 2023 Third Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ryan Mills, Head of Investor Relations. ahead. go Please

months. good MSC and to I'm to the excited to fiscal third Thank earnings XXXX last morning, week joined call. coming over you just each forward to and have our know quarter you, of everyone. Welcome I getting look

Chief with our me Chief our and both are Kristen Officer Gershwind, Officer, on today. Erik Actis-Grande, Executive Financial the call

well management we accompany Investor data refer found financial our as in our presentation call, to be will today's both and During Relations statistics, that the slides comments, can of as operational various webpage. which our on

Let of a summary the me of two Harbor presentation. slide on reference our accompanying Safe which statement, is

contain well the meaning call, comments the we laws. forward-looking of this the Our U.S. website supplemental statements as on securities within are as information the providing on

These these and forward-looking cause statements. other to differ that by are from press filings. actual and risks Information earnings noted results could these statements those our release anticipated risks materially about SEC uncertainties involve our in

addition, may financial the most which call, website, versus comparable or contain certain our reconciliations refer the Please of in to we the the non-GAAP to on refer this non-GAAP measures. results, our are which financial measures presentation measures. adjusted to reconciliations adjusted In during directly GAAP GAAP

the turn to now call I'll Erik. over

longer begin Ryan. environment. I'll morning, outlook. current I'll on today. some with everybody, on and term call, Good color you, today's perspective our Thank recent and us thanks joining then On for the our provide performance

balance up line open fiscal I'll questions. fiscal the Kristen for performance mission updated critical the will quarter for accomplishments, year. third the financial our things and up before provide wrap specifics our expectations then we on more of

our like two performance, into to dig discuss I'd I Before topics. though,

experience, welcome earlier month. sell-side first Ryan Relations, Investor the joined and our Head brings who our coverage us Investor peers. Relations MSC He several this and of including of Mills, is new years of to The

continue we shareholder team have the value. to on Ryan striving We're to MSC as thrilled increase

press topic high is shareholder recent with the and details the the Gershwind benefits agreement Class will proxy company's are Jacobson with And be filed shares. voting agreement week. outlined later second The the will that a statement provided and this eliminate SEC release issued associated the in The last be B the in more summer. that we family to of the information on

and aspects, to this At more approve MSC that two-thirds attractive votes to a instead scope level, transactions and replacing rule sales the its confident will simple broaden several significant high a majority standard. a we're such though, voting investment other of investors make of as asset mergers, through outstanding

exploring shares dilution the premium also note new business. voting our in belief position increases repurchases Limiting from our independent that a in receipt offset of director of outlook family's of to the this transaction. and share ownership shares the and Adding families economic XX% reinforces the I'd outstanding. our to long-term

on to reclassification process is number of performance. look I'll closing now conditions. completing our and We The by of quarterly company's successfully the approval move to forward shareholders. the transaction closing the Most importantly, subject the the transaction. a to

sales day Ongoing share of growth behind quarter the XX%, critical our execution strong daily one gains our approximately average with mission despite They basis. third sales in and on of less initiatives successful fiscal nearly resulted primary growth. selling XX% an drivers or

target. Industrial continues Index Production our This excess outgrowing trend of or long-term in the of the IP

include the solutions, diversified As growth metalworking, the public digital, an portfolio our sector. markets priorities with reminder, emphasis five on and end a selling

quarter in strong more growth business. with year-over-year. sector. sector of these few was we XX% of And our sector a with a the particularly see We've described that beginning highlight this I'll the several quarters Today, momentum than past for public now building public public

wins. significant contracts from a existing of of purchases number growth some two-thirds of capital particular, this small In quarter recent That was penetration win. large from public by of benefited driven with a approximately contract along sector the addition the

of long-term below winds and this While nature are company provide They margins. benefits. average near

wins they this near allows in bolster to Starting I'll working modest term, flow. require momentarily. other accelerate that And and further our cash capital market these our investments us in on investments strengthen touch position. with And the areas to

Over diversify for across helps the gains our our these margin wins position business. which share higher opportunities longer term, to sector, improve we believe the additional and

to into expect at and Looking fiscal the albeit forward, continue in we pace. XXXX, win recent from revenues a contract lesser QX

These continue vendor and front, On value plenty and for touch, future solutions grow to our runway the solutions inventory of high the customers And continue offerings. high retention given add size solutions. we see for double-digits. strong share managed to achieve in-plant market appetite vending the gains growth across we

fact, growth represented sales continued In new our high mark of terms that the quarter water in bodes third in our And signings. in-plant well for fiscal future.

machining to for announced cloud, which an was exclusive with e-commerce, our quarter. earlier Moving through strengthened we this agreement future position growth

a machining of brings to influencers MSC makers cloud deal This the process, early such engineers are as of to closer gets and partnership programmers stages manufacturing community. the expands decision in to new which who to user and end the procurement process. reach the great key to MSC excitement It MSC's

and have in as MSC's we're user the community's site end integration from jobs. since their announcement. still which selecting cloud offering, is tools to The the increased customer visits will for the significantly when process, ideal time the machining will money benefit needed excitement while And brand save building

now I'll external environment. to turn the

the contractionary as the outlined readings. IP consistent we conditions have readings the index This index when expected year, from As moderated fiscal through business and moved declining such metalworking framework for indices we is as quarters. sentiment our with the

third of across areas declines. the But business ground levels. volume some of the customer during activity seeing is seen more quarter. have tone We're We the fiscal leveling the significant on than some softening rather and stable one

see automotive in conditions In favorable we such end as several aerospace. addition, markets and

expected. front, as the pricing conditions moderated On have also

prior but benefits narrowed high increases pricing, from achieve year. to in lap this we as continue is We the price

work costs our through P&L. to While higher continue product

have suppliers. describe would supply customers the increasing levelling. chains the as doing fronts on achieving environment on are both competitive and we their just focus prices, Overall, pricing normalized, with the as demand we are As our

Regardless drivers prospects our the of for I confident just described their of In I are growth our continued earlier, growth. many term, near environment, starting the about remain as to stride. hit

seen Our anchored value technical proposition, high is and wins customer approach, the in yielding our rate which at past. than in higher is a touch we've

full and of benefits yet despite investments to in Many us revenue position. given to maturity rate. accelerate run This the strengthen numbers. strategic our not But not confidence full are seeing has wins or we're these close further market uncertainty our

investments we're e-commerce function. including our platform, advanced an and product example, in accelerating discovery For search

We expect with and spot smaller these buys. enhancements to increase future growth, particularly customers

benefit believe we Looking beyond term, there the term. several MSC dynamics longer the over are near that will

the activity. as incremental First, drive continues will domestic an trend see increased we number reshoring that manufacturing projects new of construction plant

by penetrate production aerospace, leveraging electric opportunities driven end post-COVID a runway new elongated and higher new commercial markets backlogs provide in recent capabilities third, Second, long we expertise such in to market. growth see increased acquisitions. our by vehicles from of as demand, and growth technical further end And that medical

driven I'm by productivity, progress, we will continued several by which also onto for Moving be the outlook believe encouraged factors.

and continuous mindset transitioning critical to as Kristen. initiative of is First, a under mentioned and before, I program improvement our Martina leadership our the mission McIsaac COO,

we'll Second evaluating structural cost our opportunities. business for continue and related,

back. progress now nice heels in down categories, we're reviews. making others some And we're lastly, waves of first the cases, winding pulling pleased supplier our two and on category market reductions responses. indices We're growth we're getting discussions. of the line having with exciting cost product In we're And on

of find suppliers the increase broad customer. This For and a example, assortment engagement buy through experience, consolidation we're suppliers of the and search, our share with eyes approach simplify SKUs gain success as and with seeing with who us. necessary isn't partner will select early where our

In Streamline in drive our partner plant growth momentum I'm and years becoming to should savings ago. the floor MSC we critical operations see we're growth on 'XX. profitability the above also improvements. gaining IP that meaningful into mission the excited envisioned summary, index on DC We're translating and that fiscal

Kristen. things to over turn I'll now

everyone. a and which basis. six of this focus morning. presentation the primary reflects to good be for will results, Thank slide adjusted the turn you, you where Please key reported Erik, metrics my fiscal Slide morning, on quarter can see our five third

as recent flow and fiscal contract Before a mentioned, driven public into half purchases. win operating small growth Erik I in is the growth back sector margins some the year. numbers, cash our Wins compression to was causing by related are capital quarter, margins have primarily dilutive dive to attributes. This strong of these this very during strong like but

as I related color I result, the a on some will and walk from updated As impacts sales through our results provide outlook.

and strong generation. successful critical performance, quarter initiatives in mission resulted ongoing gains across onto Moving our share third execution cash

actions Combined average price to bolt-on benefits favorably basis That IP quarter. more taken prior index, in X.XXX with to year-over-year year-over-year XX daily compares year the points XX.X% modest just and from to during the X% a from sales grew billion. contribution which acquisitions the improved due

as customer other daily sector sales grew core increased average public customers sales over a basis, national range. as while mid-single-digit By on well type, year-over-year in XX%, accounts and the

about since Despite we down feel wins. new upon national for last ongoing accounts the quarter, our growth customer in based good growth sequential step prospects

through growth lens Looking will growth strong at initiatives each make mission to five progress. of the Erik the our them continue I through briefly. we of drivers, our run critical sales mentioned earlier.

role customer improve levels through the productivity. and best-in-class we our places production to differentiation. service at our and customers, to us In metalworking, expertise, a where increase critical This breadth productivity continues them our product with competitive drive ability optimize technical levels play helping in spindle

Additionally, ever. our shrinking labor as is value than our aging more skilled face proposition an manufacturing customers workforce, and important

end ahead, penetrate share markets. and competitive well high growth strengths take us position Looking further to our

to the We machine to continue ADS year. total company represents in solutions. continued in-plant Vending XX% share our XX.X% with sales, and capture XX.X% year-over-year vending compared grow to of prior and

basis of in-plant as have our without representing of growth performance not In-plant sales improvement and that and grew been XX through the those the total higher much points would public It's an sector the sequentially. total customers among sales signings of QX the in sales, remained vending transact strong of XX% noting did percentage year-over-year, of XX% worth impact strong solutions.

includes experience e-commerce, all of solid to MSC's continue engagement, growth. In we which aspects digital

sector channels. e-commerce not percent sales, to total public declined growth over XX%, sales increased year's that prior through have if for transacted but a different year-over-year would of As XX%,

Looking ahead, our Erik being as small focused ourselves strengthening our with additional digital are investments digital we customer a to portion growth mentioned. accelerated of on positioning and capabilities, capture

ADS of continue We execute managed other share selling the Class in portfolio inventory, the across increase range. C in vendor primarily experienced consumables to wallet, which our is low our growth successfully to initiatives two double-digit

growth with diversification of sector our continues as XX%, in public initiative on mentioned. previously excess I Progress

the to compared for quarter year. margin the prior roughly down gross XXX points XX.X%, Our was basis

a the The by benefits year-over-year recent primarily win Acquisitions headwind mix drove related P&L. working discussed contract public growth. XX XX points modest previously The decline cost was points attributable driven through more customer inventories to year basis XXX basis higher another of remaining and pricing sector headwind. to prior actions to point from basis the reflects and

Sequentially, in the prior contract, approximately without the were as of expenses expected. the quarter versus nicely Reported $XXX year sector the quarter. improved gross million margins impact million in public operating $XXX

was basis, drive selling adjusted higher year-over-year the care by costs, dollar $XXX to operating variable labor volume, and costs and points increase declined to approximately tied an expenses health digital of XX primarily total expenses growth. XX.X% sales. to On million investments In revenue accelerated higher-than-expected basis were terms, driven

health quarter, increased in reflects deferred claims our believe to result have roughly and undergoing we million is elective procedures, running. care been more X demand. With This of we associates are respect we which a experienced than past costs, this we primarily self-insured,

positioning exceed partially by cumulative to were million year-to-date of $XX $X increases our of year-end. million, This brings to million the in million to related These savings and $XXX target offset mission-critical fiscal by approximately fiscal $XX quarter. savings savings total us

offset period. to XXX Reported prior operating from share decline compared margin of per a the partial was year approximately sales. prior driven margin GAAP operating an in earnings basis On percent gross year-over-year XX.X% in $X.XX expenses as XX.X% was to The adjusted year. compared of margin the declined prior XX.X% points compared reported We to period. by the operating decreased lower a $X.XX year with of basis,

On basis, $X.XX in was prior versus the an year. EPS adjusted $X.XX

balance cash to seven review flow. sheet slide our and to Turning

at quarter debt We million maintain ratio approximately a net and net sheet of with healthy balance of approximately times continue to leverage $XXX X.X a end.

Our credit on $XX liquidity $XXX with and available. all of our cash million remains strong nearly facility million position of hand is revolving

million quarter Additionally, we on down which made levels. $XXX $XX million, levels, ended progress from inventory the QX at

of quarter quarter the track cash target in the up expenditures million, cash for the fiscal and during the us Strong conversion achieve Capital $XX year. flow nearly operating on million has $XXX XXX% flow quarter third well XXX% year-over-year. during free of approximately fiscal XXX% year-to-date of resulted to XXX%

Our shares. generation allocation capital including solid balance and B to of cash our offset strategy, Class support the from dilution our sheet desire reclassification

to by shareholders tuck-in continue buybacks shareholder of focus will reinvesting capital high-return acquisitions. We creating into and returns in form share as pursuing business, dividends well ordinary for the on value the as

a have As remaining on authorization. reminder, shares we million repurchase our X.X current

Now let's fiscal XX. turn outlook slide our to XXXX year updated on

daily we sales to range strong sales year-to-date, are average Given growth guidance a performance of our to fiscal XX% XX%. raising annual

This of compares X%. range favorably to X% to the prior

full the We have expect As days adjusted five now to operating a we reminder, selling around fourth the in for quarter. margin be fewer year. XX.X% year-over-year

our factors includes outlook of original updated Our outlook. part were not that two

of dilution margin Tru-Edge. Supply to the Buckeye acquisitions in-year and First, the related

outsized half. the growth impact the of Second, second the in public sector

continue operating generation cash for the above with conversion in cash year fiscal to we 'XX. expect flow XXX% full strong Lastly,

that, back to turn will with And Erik I closing it for remarks.

you, Thank Kristen.

performed. nearing remain are and outlined goals program, or on pleased nearly meet three-year track years of team how exceed has the We ago. we We three end to all I'm mission critical see our to our

view look best camp being our as first to future, we our four the but journey, in the quarter, distributor base by As along of the fulfill march of we mission of world to the measured our at as stakeholders. rather not the the all industrial end the next

and for I'll of up open thank work I associates their all line hard the now our questions. for all

question go We now Baird. begin Instructions] from Please question-and-answer David comes Manthey the session. first will The with [Operator ahead.

Thank morning, you. everybody. Good

Dave. Good Hey, morning.

Good morning, Dave.

on new question first the So business.

a but You then win, of talked said about large you this purchases. it's small as contract capital number a

the If I'm what us concrete it's means what that on look at fourth rate on then give you million you does I like of maybe can numbers you in said, But think, what help and any can $XX in there. you run based if and can terms the current kind quarter. give quarter then of revenues, 'XX, us that Kristen, thinking in us details

take first I'll Dave. Kristen. the part, Hey,

answer the yes. follow-up, I'll

You got it.

so a going in color, the is, itself. nondescript contract I'll caveat This to put we're bit that be win can more competitively So terms sensitive here. little as Dave. just the imagine, little you a of

with mean a in we an the it, order. contract, capital though, a there's to what contract were put a number just of win, as small more specific items a capital purchases. a done akin by that we I an opposed some on here to entity just But small one as opposed something and purchase consumable. described small to machine a a is a Inclusive color or by what is mean ongoing relationship And onetime to

tend capital that's And the purchases, the come to reason is do. consumables lower capital purchases with like relevant margins gross than those,

Kristen's big of infringing bit So on part a quarter. what little pretty you that third healthy the in see clip you're going saw I'm to a is question. of the

half quarter into more what in some in be the probably there'll and fiscal saw the fourth around we at around, somewhere some quarter, third 'XX. of continuation see then You'll

an more to stream creates with for big not wins establish an a have products. I opportunity Obviously, of with benefits think impact or then it, revenue contract I these that think general also follows what business customers MRO the and we with revenue with relationship see consumable most points, the along that entities couple may margin business here. happening using type we're is creating follows immediate ongoing machines. team of and a importantly, on that Dave, I sector There's that the public the a permanent on higher before there's relationship along had

to about if that to discussing. it, suggest it take about on of I question for way the revenue, would and your sizing half And refer Dave and percentage to that it, as to kind the growth is QX I a attribute would 'XX, the win QX you sector of about 'XX Erik debt, thinking public of add the two-thirds

two-thirds And headwind the size come that would to to prepared margin. it do to apply in on serve, that. logic points I how terms a XXX in of logic. the but And OpEx lower from margin wouldn't mentioned of then a remarks gross rate to orders basis about profit, with to We you the normal mix. apply similar try can gross let to translate cost variable then similar

in kind picture. would I or third so to that happened of win maybe of you out -- what have find the on the on come cap-ish That line. with to for number will noise the you the with top quarter the the up frame from

went the that's take the discussed way impact have being for the performed simpler prepared impact saw think remarks. is, that what one item in we the fourth out in expected quarter. a the as perhaps unanticipated then to size of the of And the quarter, say margin, noise half it third the and would we would that you if sort care in health of the the I we cost created And we about about to, being

based on helpful. business Thank income the of you that's take lines same I'm to excluding the the new That's change guidance, from the in gotten win. along that would expectation not talked there. XX couple gauge just on your Okay. the operating here new checking tell the the government you what I you of underlying that trying the that of midpoint just win midpoint because be underlying just is this the thoughts I'm days and If when was slightly. guidance levelling, thought? would a and just if about just looks said, Erik, same. or you if I'm the income the just And roughly gave, are as business, compare me a that guidance, operating in dollars it you and what government the, old assume you ago expectation up worse that like expectations low it margin government And to of guidance if sure

question. say I outlook is that unchanged would is punch the the Yes, Good Look, essentially, Dave. line. business, our underlying

If from the we outlined days indices, look, the sentiment et we saw of project and said, out. the cetera, framework, It we in moderate. down, rates even coming the leveling you the that's when Dave, to back ago, beyond anything is the that that rates start XX what's pricing, just year the comps, dropping. playing go we growth higher growth given the that mean would between lapping moderate lapping environment, It's the IP doesn't

real surprises. no So

your on on the you things. midpoint Dave, indicated guidance, to we change And of on the quarter, about question when the the if your you had second thought like is what two think spoke we really after

about mix, you care If points the increased XX-ish which sector then from midpoint think and the approximately it's the health basis costs, of roughly about moving the is public to the impact XX.X%, basis points. XX

Okay. Thank much. you very

welcome. You're

go Please question Tommy next The Stephens. Moll comes ahead. from with

Good my morning. for Thanks taking questions.

Hey, Tommy.

Hey, Tommy.

start to on want I cost. price

You've you helpful? sit quarters any know next addressed but the there now, how Thank context what based the could -- on should few more it today how would you a you. over unfold be bit, provide you and that where on

Sure, Tommy.

So gross in the about prepared headwind price point remarks, we cost. XX basis from a mentioned margin

margin positive dollar price still third quarter. basis, was headwind to gross but in it a in we're So a on the cost

of fourth last peaked it's I come implies would quarter, in we mentioned to decelerating QX, and away. the you we think benefit that of so in from the right costs price have down then I a sort quarter, think And peak and cost, more expect grow headwind

we'll in continue that's say probably higher pressure unwind to those get the 'XX, next And cost fiscal 'XX first particularly the costs but entered off balance some sheet. sheet. of the unsurprisingly, I'd quarter, half product more the we as inflation to we off flat tow on we've a when balance continues, the that size rolling

So QX on 'XX, hopefully, a more it to and color helps QX come more. bit

helpful. And then That's on Erik here one you. for Thank maybe reclassification the agreement.

that's this becomes and shareholder of there, parter, Erik, greedy, I just capital long as there make any perspective. this it think may too sense change I but hopefully, how the distinct or we may high fast have from change for of if was be effective. as when terms issue? could timing we presuming until as a Could occur from should curious In a do level resulting two you vote would the a of And be allocation strategy business not more a very reclassification? imagine Or the

I'm you me second to let to going the you Tommy, your having the part. the on I'll hearing little answer at But might I your timing ask the question. end. question. just part of take that part of first bit of one. start a We repeat were trouble

So SX SEC, followed with the submitted the that's the by steps to proxy. next

of to proxy So sort late summer be a you can ballpark quite reasonable the assume is issued. for

timing. then everything make if And I both you a that want shareholders, clarify of expect And the the to to is approved that that, goes plan, can Can few by just expectation closed was fall to days then in vote according reclassification you sure assuming part question after caught I as probably reasonable a that. your again, on right. second the

noise. My part, Thank and reclassification an or extent it as you. the should the the capital strategy may for the company those to have issues. on you impact allocation distinct the apologies we for think at business Thank and/or if and question of was most which Yeah. regarding

think through them maybe we is that million, way are which dilution with say of another -- or of the Yes. we're to move able I'd now. that forward working off if and share about as repurchase distant issues that you. $X Got the we is saying of

committing some We anything the able would of would plenty to We're doing not scenario allocation We've terms and room now, but don't that see capital planning priorities accommodate previously. we've outlined allocation in absolutely prevent us available different priorities. of be capital our on to that from compromise we got funding.

in the the receive a in of through, I business really we only look, the strategy of prepared add think have. Kristen remarks portion good that the goes company. of is, the feel is strategy, confidence answered the premium form we the this on about capital allocation I would I'll sign color, shares, that the Tommy, And the in which mentioned family direction if

feel you think been that I So ahead we've that direction we the on continue are can going good to forging on.

Great. back. turn Thank it you and I'll

Stephen The Volkmann Jefferies. comes ahead. next from go with question Please

Hi. folks. Good morning,

Good morning, Steve.

I'm that were and Kristen, in morning. that at cost you to sort side And a you still Or curious the live you that have maybe 'XX. how this question. rates with. plays to come a higher sort to come Is level we'll sort coming coming price after that mentioned of of would higher, that are unlikely containers new to where back we little of through in it to the of the think said the of first work is Good is that have I going half situation kind expect cost And cost to I'm sort higher through. pricing sort we in, that and of deliveries down are down of have of that. just is that? the a sort then this

take that, I can Steve. Yes,

price like it, about what's sheet. you've that kind of I QX, on relevant if first thinking sitting and is into but costs think 'XX really already parts two the part about it of are way would for got you're the So the balance then

So depending fast inventory since this inflationary of average are the cetera. method been balance higher off impact sells, absorbing we've items the how onto on began the priced because P&L, turns that of the and sheet what the onto item the rolls period costing et

quickly bit because of about know to the about timing a how just us P&L. We there. really That's what's the little impact a what make in sheet it's easier for impact. of this and on there's the is is. have size So balance model the hits the now We portion it of assumptions to some big

of complicates that through choose online we that additional second 'XX to our the then may But come increases the respond impact how estimating thing from price. would and cost suppliers is to those

start So 'XX. it you complex, especially a into bit gets that's thinking later where if

you. Got

Okay.

very cost Steve, now been of is the through -- one early for the away a costs of add we price, in will take color through just stages way average decades get going in now. we're the what later when two the in P&L, cycle, the because over we business here cycle, typical way. the very our right it other cycle is a its system time, long is costing their I'll -- of work having working are whereas inflation This and

largely and other is typical is timing very this So of cycles.

to Erik, you've Understood. cadence the I past quarter feel? us was sort there? call your in of think of kind give then, progressed. Thanks. June And Anything the to business how sense enough of calls, been as out May, does How

Yes.

rate. step moderation. but surprise that I prepared you months our probably a used accounts down think, big Steve, thing nine we've national not at was look, biggest the I ago, numbers, words six, appropriate. in one our that interestingly, if growth we are of is change the a mean to the change most given seen look the from QX leveling in QX was where certainly, there the a remarks from were we a No there, IP, moderation

have time. tell I been you, there to the long in is a And on it's ground the probably the best feeling

there sometimes I of much of our and is is And how is recent what's know that feeling a hit meaning how good that macro, are how tough because micro that out is wins team tease much about customers haven't our yet number doing the to of numbers.

it's But like falling hard feeling off. things tease general, we're So not in to that are out.

in a change. growth there's going seeing acquisition, lapping not of rate ton what was that comps certainly less is A June we're lot the we're than of an is higher QX, lapping sequentially but it be this, in we're to

it. Appreciate Great.

Baumann comes next with The from go JPMorgan. question ahead. Please Patrick

Hi. Good morning, Thanks Kristen. morning, Good Erik. questions. for taking my

morning, Good Pat.

Good morning, Pat.

Good morning.

sector public clarify on to win. one first Just the

purchases. of guess, two-thirds those I capital customer So in growth the XX% is you said from, that group

you $XX which It points. like kind by were expectations equal, XX% like kind to Can XX%? basis compression some two-thirds improve I help year-over-year little So were where on is gross this tie all be? line revenue be on then that of only but bit calculate then below margins, to there And together gross XX part just that that to business at all the XX think I margin, would I from XX% off your came gross you to the else to quarter-on-quarter XXX of of margin million. if saying suggests up way close prior I win. in thought Or to of XX% sector a my is to that's am you're kind of public other it

gave on a points XX the improving mentioned sequentially. little a to number, volume XX you impact. high way basis previously basis you're you're we to So bit the put Maybe gross the and high on margin the margin guidance simplest Pat, on little it, points gross

out you that of impact exactly the If what happened. contract win, take the is

right. All Okay.

focused business? address, reinvigorate can you And be strategic So okay. is I for of then on I website I on sales sales you and But maybe related into that in would of seeing in If any math the adjustments making high investments of in other the better of the down mission think the terms move mentioned single-digit, bucket back question, growth. pretty I programs, of XX% in that the to the kind driving vending, subset business initiatives also growth that next government of the if maybe growth may, critical is close. stuff kind results you're rest Any customers. that on color Can of just business were to VMI, helpful? that to nonpublic you're give my nonsolution any that kind of various subset. of you

sure. Pat, Yes,

we're pivot technical I at value So you're higher to the the pivot think, of talking touch winning made for become doing are And And there. to a aimed that. years lot proposition us. really we was on just because that enhance few look, more the and we're encouraged a plan a about our customers and programs back,

what at all follow I proposition, didn't to, the and And and or where know, higher new numbers deny I I I you're don't I not. touching we're think can't much customers yes, directionally, saw, numbers, growing than we're referring confirm rates but the we're where with the value exactly

what we So investments. you mentioned where about asked doing? customers, touching we're digital we not are And

And now. going lot felt our work for investments. So One program. there's always kind we right And e-commerce to of we've pillars had of a is there's a couple strong sure. digital a like of e-commerce, on

and always discovery we're work felt make that's our the you with that We enhancing even We're transaction MSC be enhancing better, to never product also one. our to platform. going still, stand have so

and audience Two, would value high MSC us to to larger bring extend partnerships. our reach and a of the and larger technical digital That be proposition touch customers. allow of

So now past, in ingredient our the about become certainly, key has in MillMax value we've talked proposition. a which

We Machining mentioned Cloud.

the smaller the partnerships where extending digital are and Both second reach through would those drive of investing the growth key So been customers. pillar. we've to intend be in of MSC areas

just plus on thought a continue Any the approach discount list to follow to price to to tweaking approach that, any Understood. you that have?

do. value proposition a Look, designed value to value if pricing, a we've we it's always more believe that had should we cost be evaluate, we And that between always technical. and charge you're look, there's Yeah. trade-off and talking for and about appropriately Pat, higher And high that because pricing is volume. high add, we touch

are ownership that reduction up. going customers not on of and price focus looking to we cost for just a And total

with commensurate So that bring our we say, with I in the is go would pricing value to customers. is approach the we that's general,

I'd also touching customers say those priced in anywhere were that we're competitively. models touch higher

who yes, for one you're are new customers MSC who don't high. are of either So what where prices these I our or referencing look programs in to going to is think there have are place, times

time. all it evaluate We the

broad one expect and I brushed taking surgical at think as opposed us tweak, you to say more time. I say, but I would to massive tweak could see approaches when anything

lot a the for Thanks Understood. luck. Best of color.

Thanks, Pat.

question ahead. Ryan from go Blair. next The William with comes Please Merkel

Hey, everyone. good morning,

Hey, Ryan.

Hey, Ryan.

wanted on margin. I ask gross to So

sounds level, takes. it high like and just Just some puts there's given

typically could So the the and in didn't bps. quarters, high-level mix like sounds worse. hear right. tailwinds it it that Correct over that might high-level talk about it like little down to to about net-net, like margin four then three next range, I headwinds, you sort maybe XX of you talk bps sounds being XX if the be And gross me a

where to, like the of typical mix growth we sector that's a the more you're what about talking I from the think you're kind way tailwinds public like right? growth through Ryan, referring headwind we margin the would think, I areas solutions, have size different

I sounds sure little feels like Right. price more win, understood purposes. for couple cost, just next want sort level, the of just there's it public the the with the sector to I takes, modeling quarters like make And high a and just pressure. incremental it of puts

Yes.

spot margins. exacerbated mix good Public that a was that would tends And, sector general large was than the headwind we of for in portion normally lower quarter. at sector win, margin a definitely nature growth impact you're expect was So third on. then That be. public the of in to be contract that coming mix us. of yes, absolutely But gross because QX which from higher that in

dynamic, in there's QX. amount In will then probably touched about the what a a parts there QX. the you similar of be quarter, in I saw moving this on half a of size fourth And but we QX, think on but revenue for of earlier, lot lower

stay just worse to gross have the So saw reiterate headwind we the QX. QX thing price decelerating levels is margin, the benefit on the on is flattish price you margin that in than relatively other would will cost points I XX cost that basis such

inflationary And then on so. it's But and put little hard quarter. tougher color what period half. first a the reasonable it's the the roll be 'XX, looks going going of costs off is because We'll that say that next second the into to than like, more to on how think half margins to

That's Got it. helpful.

with Ryan. is thing I'd just in weigh Kristen, you it, the other weigh one

before Two got So this Kristen a to summarized will. size line potential all it reviews, the which we've perfectly. Kristen's giving category 'XX to would that, outlook of point, tailwinds be other

and as benefit category negative than should into the some is So through cost half, worse freight first second second our that. from if line hit is moves that half P&L. the And in price reviews

of and putting then So together puts takes, are the all you. the those and it quarter, that kind put we'll next for by

Perfect.

out high now. you rates Is drivers. on in causing see conditions slower figure any people back here this destocking? market moderated. drivers the from macro moderating the it have down just We customers just a a terms throw and sort color to is small of tighten conditions. the can of medium is the then bit of What what interest are And there? hearing in up customers bit end all maybe are to slightly you trying level, I'm IP Okay. our Is it little higher

Ryan. Yes,

say, I definitely not a the your it's given look, indices. would point, to surprise So

think indices have the I considering headlines things in actually held up show. what pretty well the

into you moderation, is softer, have Automotive across would gas you be things things and doing are the pockets of where is example. well. is are first As would doing oil booming. board we say, this mean, of well. I is probe the well. Medical levelling, the softness, pockets all, doing because where not pockets it, I one then And the Aerospace have

not across didn't we always a the all. gauge board We it's this to destocking. -- didn't destocking, is see So but hard see ton at of

overall, that's don't -- I higher the mean, see if question, off things color. impact. the think as anything of having moderating I helpful cliff. that this, of use no know I we is interest falling to like I'd word part rates some But opposed Ryan, signs don't would a

I is. it. appreciate on. it No, it pass Thanks. I'll

Ken from ahead. Newman with comes Markets. question go next Please KeyBanc Capital The

Hi. for on Fleischer Ken This is today. Katie

Hi, Katie.

Hi, Katie.

Hi. Good morning.

talk guidance ready year yet. aren't level, guys give wondering can at high But about full margins know to next really any EBIT year. 'XX we a just I'm I you So for

you're flat to be just able some price Can in headwinds. keep low these cost up mix up sales operating mid-single or margin to digits, if and given of 'XX? fiscal So impacts

take I'll Katie, that. Yeah,

still would driver. and on productivity answer around. big to sizing aggressively as definitively cost And is those, Erik online. then, at moving our So sizing the reviews, horizon piece early mentioned, arms definitely get for got come the we we're that We've really a The opportunities other question. line too the those to looking price have when

are a We're and just we're still you if those would level our over to zoom to higher come a get scenario year. pieces, a sequencing say arms planning specifics What parts. more the the trying moving moving model 'XX. of out, to for incrementals So lot I some cycle around the on XX% targeting there really and

sense here typically to then get a of Okay. without public up a the price on to makes Yes. going that been in Is back X.X% prices sense. have to trying And -- quarter? impacts on more the sector. wood headwind than That win, that like from the Just some price? questions

than say No. It's little sector impact public lower margins. Katie. way It's generally a about The gross think a I probably core. on higher, we bit the maybe bit would little

of headwinds public below the taking sector general win of one growth margin definitely public the average like So are like gross average when the is in the them about the because sector talk we our of big margin initiatives margins like rest out that the the one business.

a a So we typical margin that headwind on gross would call basis.

you. Okay. Great. Thank

welcome. You're

Dankert Loop Our question comes Please ahead. today go from last Chris with Capital.

you the morning. needle, maybe opportunities be I is much good see say, this something mentioned really to more moving guess, markets Thanks touch going exciting like EV can meaningful we're look the mean quickly? guess got here. does like there if engagement like forward years today? Hey, that Or these out? customer for five I has just and could what some on taking I medical questions. Erik, going pretty you

say would Chris, look, I both.

bulge impact a infrastructure for impact the beginning you're say, think see -- out now. starting build with we're seeing medical, I but certainly, the just and charging, hybrid the I to to cetera. batteries, vehicles right EV, infrastructure, I would electric the mean now we see the are by et vehicles don't And

think called that we've runway we of would And think seen I one now. benefit say with is the kind backlog no the to are beginning see pun we there. has that I other Chris, aerospace intended that out, we long

benefit next beginning years. for those, see we would now, quarters all I but and come things the think, expect good of So to to we're

other And the Machining Cloud. I'd point is the we mentioned one by make, way, Chris,

partnerships So like that.

great value and talked up with the reason the partnerships customers. bring customers and to our partner extend to try and line more markets, behind end about -- with sophisticated I closer to would and of do to So to end proposition more that. reach our entities is We partnerships that those Machining us be those example bring higher, Cloud are a going markets

kind there that on on And update of really thanks sales for guess comment of so then dot a in-plant, Yeah, growth see forward? just there. going where strong plot that, or you kind percent Any as Perfect. the growth much has of for Erik. been I

total -- an size I we and nice customer, say, addressable if market, a look clip. of you we by we'll with complexity for at it's in-plant, going look, at customers look been would it Chris. So at the mean, and

And makes -- it's whether years, going full solutions XX suite accounts business out this years, that national five full in-plant sense. so up our go with or you this pretty is be healthy ends a much of that of if chunk should the

the And gap high as rate, the MSC win the the real we're skills seeing for the but and customer is benefit remains remains. market labor the challenged, especially it's growth retention penetration, a the for obviously

able are to essentially a lower they outsource which putting the can so being premium is Customers on manufacturing. on value-add functions core focus operations,

that end long you the tell would national accounts if up over with the run, good of an in-plant, not to of I ought a So whole chunk services. suite

the so there. Got for it. color much Thanks

for any the turn back This remarks. concludes over our question-and-answer I Ryan conference would like to session. Mills to closing

interest morning. your time this Thank you for and

or in the As months. in a for you coming you the to joining fiscal we road set at our and forward investor Goodbye. seeing for earnings on reminder, today. quarter Thank XXXX October XXth us conferences person look date fourth is

has today's now conference for attending Thank concluded. presentation. The you

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